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Aspirations and Financial Decisions: Experimental Evidence from the Philippines

Author

Listed:
  • David McKenzie
  • Aakash Mohpal
  • Dean Yang
Abstract
A randomized experiment among poor entrepreneurs tested the impact of exogenously inducing higher financial aspirations. In theory, raising aspirations could have positive effects by inducing higher effort, but could also reduce effort if unmet aspirations lead to frustration. Treatment resulted in more ambitious savings goals, but nearly all individuals fell far short of reaching these goals. Two years later, treated individuals had not saved more, and actually had lower borrowing and business investments. Treatment also reduced belief in the amount of control over one’s life. Setting aspirations too high can lead to frustration, leading individuals to reduce their economic investments.

Suggested Citation

  • David McKenzie & Aakash Mohpal & Dean Yang, 2021. "Aspirations and Financial Decisions: Experimental Evidence from the Philippines," NBER Working Papers 28607, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:28607
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    Cited by:

    1. Tim Kaiser & Lukas Menkhoff & Luis Oberrauch, 2022. "Is Patience Malleable via Educational Intervention? Evidence from Field Experiments," CESifo Working Paper Series 10080, CESifo.
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    3. Ubfal, Diego, 2024. "What Works in Supporting Women-Led Businesses?," IZA Discussion Papers 16950, Institute of Labor Economics (IZA).
    4. Villacis, Alexis H. & Bloem, Jeffrey R. & Mishra, Ashok K., 2023. "Aspirations, risk preferences, and investments in agricultural technologies," Food Policy, Elsevier, vol. 120(C).
    5. Patrick Opoku Asuming & Hyuncheol Bryant Kim & Armand Sim, 2024. "Selection and behavioral responses of health insurance subsidies in the long run: Evidence from a field experiment in Ghana," Health Economics, John Wiley & Sons, Ltd., vol. 33(5), pages 992-1032, May.
    6. Lim, Sung Soo & Bone, Matthew, 2022. "Optimism, debt accumulation, and business growth," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 97(C).
    7. Nocito, Samuel & Venturini, Alessandra, 2024. "Inter-Institutional Cooperation and Migrants' Financial Education: An Italian Case Study," IZA Discussion Papers 17214, Institute of Labor Economics (IZA).
    8. Tabe-Ojong, Martin Paul Jr. & Heckelei, Thomas & Baylis, Kathy & Rasch, Sebastian, 2023. "Cooperative membership and exposure to role models: Implications for income and asset aspirations," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 107(C).
    9. Tabe-Ojong, Martin Paul Jr & Heckelei, Thomas & Rasch, Sebastian, 2022. "Aspirations and Investments in Livestock: Evidence of an aspiration failure in Kenya," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322435, Agricultural and Applied Economics Association.
    10. Lang, M & Seither, J, 2022. "The Economics of Women s Entrepreneurship: Evidence from Building Skills in Uganda," Documentos de Trabajo 20563, Universidad del Rosario.
    11. Tabe-Ojong, Jr., Martin Paul & Godana, Guyo, 2022. "Are Agro-clusters Pro-Poor? Evidence from Ethiopia," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322432, Agricultural and Applied Economics Association.
    12. D’Exelle, Ben & Munro, Alistair & Verschoor, Arjan, 2024. "Agricultural investment behaviour and contingency: Experimental evidence from Uganda," World Development, Elsevier, vol. 173(C).
    13. Juan Carlos Urueña-Mejía & Luis H. Gutierrez & Paul Rodríguez-Lesmes, 2023. "Financial inclusion and business practices of microbusiness in Colombia," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 13(2), pages 465-494, June.
    14. Tabe-Ojong, Martin Paul Jr., 2022. "Ecological shocks and non-cognitive skills: Evidence from Kenya," Ecological Economics, Elsevier, vol. 194(C).
    15. Cettolin, Elena & Cole, Kym & Dalton, Patricio, 2024. "Improving workers’ performance in small firms: A randomized experiment on goal setting in Ghana," Other publications TiSEM d9fa5424-4f53-4e02-8cb2-c, Tilburg University, School of Economics and Management.
    16. Cettolin, Elena & Cole, Kym & Dalton, Patricio, 2022. "Improving Workers’ Performance in Small Firms : A Randomized Experiment on Goal Setting in Ghana," Other publications TiSEM d0f494f0-87ed-4ef2-8472-6, Tilburg University, School of Economics and Management.
    17. Tabe-Ojong, Martin Paul Jr. & Nshakira-Rukundo, Emmanuel, 2021. "Religiosity and parental educational aspirations for children in Kenya," World Development Perspectives, Elsevier, vol. 23(C).
    18. Azevedo, Viviane & Lafortune, Jeanne & Olarte, Liliana & Tessada, José, 2024. "Personalizing or reminding? How to better incentivize savings among underbanked individuals," Journal of Economic Behavior & Organization, Elsevier, vol. 222(C), pages 25-63.

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    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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